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I came accross this recently and wonder if anyone else has EL code for this?
ta,
Ian
The Volumentum indicator is a set of tools. There are three indicators,
the Volumentum line, Volumentum strength and Volumentum direction. The
Volumentum direction indicator is derived from the Volumentum line and
Volumentum strength. The direction indicator takes information from the
Volumentum strength and Volumentum line and incorporates additional
algorithms to prevent false signals during periods of directional
uncertainty prior to an established trend being in place. At their core,
they are built upon research done by Richard Arms, whos revolutionary
theories have changed the way investors perceive the markets, and
creator of the Arms Index also known as the Short-Term Traders Index
or TRIN which has become one of the most important technical indicators
on Wall Street. The Arms Index was developed by Richard Arms in 1967.
Over the years, the index has been referred to by a number of different
names. When Barron's published the first article on the indicator in
1967, they called it the Short-term Trading Index. It has also been
known as TRIN (an acronym for TRading INdex), MKDS, and STKS. The TRIN
indicator is generally used as a short term trading tool and looks more
like an oscillator. In its traditional form, the Index shows whether
volume is flowing into advancing or declining stocks. If more volume is
associated with advancing stocks than declining stocks, the Arms Index
will be less than 1.0; if more volume is associated with declining
stocks, the Index will be greater than 1.0. The TRIN indicator is really
a general market index and is not very useful for individual stocks. To
find a solution for individual stocks, Richard Arms extended his
original theories and focused on volume as a key point of reference for
chart patterns. The theory behind the research is that stock prices move
in a volume based frame of reference versus a time based frame of
reference and that the periods of the heaviest volume often mark
important turning points for the stock price. At ChoicePicks.com we used
some of the fundamental concepts behind the work done by Richard Arms,
and that is the volume based reference. We took the basic theories and
integrated it with a number of technical analysis tools such as moving
averages and divergence techniques to create the Volumentum indicator.
Below is a graph with the indicators and a discussion about each
individual elements that make up the Volumentum indicator set.
You can plot the Volumentum indicator on your own charts.
Go to Volumentum.com for more information.
The Volumentum Line
The Volumentum line compares the short-term price-volume (PV) action
with the long-term PV action to determine momentum. The zero line
depicts the relationship between the short-term and long-term PV action.
PV is important from the perspective that it signals conviction behind a
price move, or in other words, short term momentum versus long term
momentum.
Rising versus declining Volumentum line: If the short-term price-volume
action is rising faster than the longer-term price-volume action, the
Volumentum line will be rising. If the short-term price-volume action is
falling faster than the longer-term price-volume action, the Volumentum
line will be declining. The Volumentum line provides you with
information about long term versus short term momentum of the stock. It
can be interpreted as positive when short term momentum is much stronger
than long term momentum.
Volumentum line above or below zero: If the strength of the short-term
price-volume action is falling but it is still stronger than the
long-term price-volume action, the Volumentum line will be declining but
will remain above zero. Once the strength of the short-term price-volume
action weakens enough to fall below the strength of the long-term
price-volume action, the Volumentum line will fall below zero. If the
Volumentum line is below zero and rising, it indicates that the strength
of the short-term price-volume action is increasing, but that has not
yet risen above the level of the long-term price-volume action.
The Volumentum line is really the core of the Volumentum indicator. Next
we will discuss two more elements of the Volumentum indicator. Together
the indicator will provide the trader with power trading signals.
Volumentum" strength indicator
The Volumentum strength indicator takes the information from the
Volumentum line and smoothes it to eliminate a lot of the erratic
movements and provide more stable signals. It then displays the results
in the form of a histogram or an area chart. Blue lines (or a blue area)
above the zero line indicates the short-term strength of the
price-volume action is increasing and that it is also stronger than the
long-term price-volume action. This indicates that an uptrend is likely,
given that momentum is positive. Red lines below zero indicate just the
opposite, which means the short-term strength of the price-volume action
is decreasing and that it is also weaker than the long-term price-volume
action. This indicates that a downtrend is likely, given that momentum
is negative.
Volumentum" direction indicator
The Volumentum direction indicator (colored bar) combines the
information from the Volumentum line and the strength indicator with
additional support-resistance and trend filters to further eliminate
false signals caused by erratic price fluctuations. The information is
then displayed in a color-coded bar, where blue areas indicate the high
probability of an uptrend, red areas indicate the high probability of a
downtrend, and gray areas indicate neutral or transitional times for a
stock or market. The Volumentum direction indicator is designed to
indicate the direction of the current trend of prices in areas with high
probability of it continuing over the intermediate term.
You can plot the Volumentum indicator on any stock using the following link:
http://www.prophetfinance.com/affiliates/choicepicks/sc.asp
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